Public debt has doubled to 200 trillion won in three years from 2006 to last year. This debt will soar to 250 trillion won this year and 300 trillion won in 2012.
It is worrisome that public debt has been rising fast. The OECD has already advised Seoul of seeking ways of reducing the debts, which are equivalent to the government debt. The public debt rose to 20.3 percent of GDP last year, up from 10 percent in 2004.
Their debt ratio rose to 152 percent last year, higher than 95 percent of listed companies. It means public companies are more debt-ridden than private firms.
About 70 percent of their debt is linked to investment in real estate. When the property market continues to be stagnant, their debt level will rise as returns on such investment would be below target.
Once the property bubble bursts, public companies will face insolvency. When this becomes reality, the government will have to raise taxes to help them repay their debts.
Under the law, public companies must submit their financial health reports to the National Assembly from 2012. The National Assembly should closely monitor the debt level. Policymakers must start plans to slash the debt, including bold downsizing or privatization.
The government should not mobilize public firms for unprofitable and questionable state projects. For example, a state-land development firm LH borrowed heavily to refurbish the four rivers.